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TMI Blog2011 (7) TMI 1323X X X X Extracts X X X X X X X X Extracts X X X X ..... . It transpires that M/s Asha Edible Oils Private Limited-Respondent No. 6 (hereinafter referred to as the 'Company') was granted credit facilities by the Bank. Respondent Nos. 2 to 5 are the Guarantors to the said credit facilities provided by the Bank but as the Company defaulted in payment, Original Application under Section 19 of the Recovery of Debts Due to the Bank and Financial Institutions Act, 1993 (hereinafter referred to as the 'Act') was filed by the Bank before the Debts Recovery Tribunal, Jabalpur for recovery of ₹ 12,38,91,472.00 with pendente ilite and future interest. This application was subsequently transferred to Debts Recovery Tribunal, Allahabad and was numbered as T.A. No. 1415 of 2000. In the meantime, an order dated 5th October, 1999 was passed by the High Court in Company Application No. 5 of 1996 and the Company was directed to be wound up and Official Liquidator was appointed to proceed in accordance with law. 4. The Bank filed its claim for an amount of ₹ 12,38,91,472.00 with interest, pendente ilite and future before the Official Liquidator. The Bank, however, filed its willingness before the Official Liquidator to accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards principal debtor stands discharged fully and therefore, no liability can be fixed of the present Appellants either in the capacity of the Directors or in the capacity of guarantors to recover any further amount either from the Directors or from the Guarantors because the liability is coextensive. 7. In the present case, there is no dispute that if the amount is not recovered or cannot be recovered from the principal debtor then the amount as such, can always be recovered by the secured creditors either from the Directors or Guarantors but the circumstances in the present case are different. 8. The learned Counsel appearing for the Bank relied upon the judgment passed by the Hon'ble Apex Court in Maharashtra State Electricity Board Bombay v. Official Liquidator, High Court, Ernakulam and Anr . AIR (1982) 3 SCC 1497 and relied upon paragraph No. 7 of the said judgment to substantiate that in case the principal debtor is discharged by the operation of law in bankruptcy (or in liquidation proceedings in the case of a company) then same will have no affect to absolve the guarantor from his liabilities. In the present case, this is to be seen that the said judgment will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88 CAL 18. It is also his submission that discharge of the principal borrower by operation of the Bankruptcy Law will not discharge the guarantors and in support his submission, he has placed reliance on the decision of the Supreme Court in Maharashtra State Electricity Board Bombay v. Official Liquidator, High Court, Ernakulam and Anr. (1982) 3 SCC 358. 10. Sri R.P. Agarwal, learned Counsel for the Respondents, assisted by Sri Ravi Prakash Srivastava has, however, submitted that the Bank had filed an application dated 6th May, 2003 supported by an affidavit before the Company Judge that the Official Liquidator may disburse ₹ 78,16,428.42 to the Bank towards full and final settlement of the claim submitted by the Bank before the Official Liquidator though the claim that was submitted by the Bank before the Official Liquidator was to the extent of ₹ 12,38,91,472.00. It is, therefore, his submission that in view of the application submitted by the Bank and in view of the order dated 2nd July, 2003 passed by the Company Judge, the Bank cannot claim the remaining amount and the Appellate Tribunal committed no illegality in allowing the appeals. He has further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger of the Bank was filed. 13. It is in view of the report submitted by the Official Liquidator and the application filed by the Bank that the Company Judge passed an order on 2nd July, 2003 which has been referred to above. The Official Liquidator was directed to make the payment to the Bank as the Bank had agreed to accept the amount towards full and final settlement of its claim. This order was passed by the Company Judge on 2nd July, 2003 and, therefore, the Bank should have restrained itself from pursuing T.A. No. 1415 of 2000 which was filed by the Bank and which was pending in the Tribunal but the Bank not only pursued the application but also submitted before the Tribunal that since the claim before the Tribunal was to the extent of ₹ 12,38,91,472.00 with interest and it had received ₹ 78,16,428.42 only, a direction should be issued to the Guarantors for payment of the remaining amount. The Tribunal dismissed the claim of the Bank against the Company but allowed the application as against the guarantors (Defendant Nos. 2 to 5 in T.A. No. 1415 of 2000) and issued a recovery certificate for the payment of balance amount with interest. The Appellate Tribunal, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the liability of the surety gets automatically terminated when liability of principal debtor is extinguished, deserves to be accepted. 17. Thus, there is no merit in any of the contention advanced by learned Counsel for the Bank. 18. What further needs to be noticed in this case is that the Bank, which in all fairness should have restrained itself from pursuing the application filed before the Tribunal which was numbered as T.A. No. 1415 of 2000 once it had agreed to accept ₹ 78,16,428.42 towards full and final settlement of the claim submitted by it before the Official Liquidator, not only pursued the application but has also filed these petitions to challenge the order passed by the Appellate Tribunal. Though the order passed by the Company Judge on 2nd July, 2003 has been enclosed, but the filing of the application and the affidavit by the Branch Manager has not been disclosed in the writ petition and nor these documents have been enclosed with the writ petitions. It is, therefore, clearly a case where exemplary costs should be imposed upon the Bank for unnecessarily pursuing the matter and are, accordingly, imposed. 19. The two writ petitions are, accordingly, ..... 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